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The Economic Impact of Development Investment in Birmingham 1998-2010

Published: August 2001

This topic report examines the impact of the current boom in development investment on the Birmingham economy. The report measures the impact of the current and planned major projects and uses this information to present a customised economic forecast which is compared with the base forecast previously published in the Birmingham Economic Review 2001.

Information on the major projects has been taken from the Development Schedule maintained by Locate in Birmingham. A total of 86 projects have been used to customise the forecasts. Of these nineteen, worth around £330 million have already been completed, thirty seven, worth around £2 billion, are under construction and thirty projects worth £2.2 billion are planned.

We present three forecasts:

• The base scenario is the base forecast from the LEFM model and excludes all of the additional local information;
• Scenario 1 contains all of the definite projects i.e. those completed and those currently under construction; and
• Scenario 2 includes all those projects in Scenario 1 and all of the projects that are currently in the development pipeline.

The base scenario and Scenario 2 should be regarded as the boundaries of a range which is most likely to contain the outcome on the basis of current information. The key findings of the report can be summarised as:

Output

• The base forecast is for average GVA growth of 2.4% pa between 1998 and 2010;
• The Scenario 1 forecast is for higher average output growth, of 2.8% pa, during the forecast period;
• If all planned major projects go ahead under Scenario 2 then average output growth will be 3.4% pa during the forecast period;
• The most significant impact on GVA will be in the service sector in Banking and Finance and Professional services. Other sectors that will benefit include health, construction, retailing, hotels and catering and miscellaneous services.

Employment

• The base forecast is for employment of 511,100 in 2010, an increase of 19,400 on the 1998 figure;
• The Scenario 1 forecast is for 21,100 jobs above the base forecast by 2010;
• The Scenario 2 forecast is for 46,300 additional jobs above the base forecast by 2010;
• Under both Scenarios 1 and 2 the growth in part-time employment will be much greater than full-time employment so that at the end of the forecast period the proportion of workers in full-time employment will be less than under the base scenario;
• Despite this forecast job creation, the Manufacturing sector will still continue to decline so that in 2010 it will account for between 14.2% and 15.2% of employment, compared to more than one fifth in 1998;
• As a result of the development of a significant amount of office space we expect growth in Banking and Finance and Professional Services to be higher than under the base scenario. We also expect growth in employment in retailing to be above that forecast in the base scenario;
• Under each of our scenarios we expect growth in employment in higher level occupations (such as Corporate Managers) and falls in lower level occupations, usually associated with the Manufacturing sector (such as Plant and Machine operatives).

Other Investment

In addition to the major projects highlighted in the LIB Development Schedule, there is also a considerable amount of small scale development going on in the City. This development includes, for example, extensions and upgrades to existing facilities as well as some new facilities. The data we have on these developments are too limited for us to estimate the employment impacts but we are able to gain an idea of the scale of the development by looking at the amount of floorspace involved.

• A total of 4.78 million square feet has been developed in some way. Of this 3.9 million sq ft has been completed and 870,000 sq ft is currently being constructed. (Scenario 1);
• A further 2.58 million sq ft is associated with 98 projects that have planning applications pending. (Scenario 2).